Charity Provisions Stripped From Tax Reconciliation Package, But Still Alive

(May 15, 2006) Congress removed nearly all of the charity-related provisions from the tax reconciliation bill, but there are some signs that it may still consider some proposals on other legislation this year.

Stripped from the bill was the IRA rollover provision and non-itemizer deduction, along with a series of charitable reforms including limitations on donor-advised funds and donations and contribution easements. One of the most important changes before the charity provisions were dropped altogether was the removal of the minimum threshold on gifts for taxpayers who itemize their tax returns. The only remaining charity-related provision is a proposal that would stiffen penalties for nonprofits and other organizations that participate in tax shelter transactions.

House and Senate negotiators had been working for some time to fashion a compromise series of charity-related provisions, but were unable to reach agreement. Given the onerous nature of the reform proposals which were tied to the giving incentives, many in the sector determined that waiting for another legislative vehicle is preferable to some of the provisions that were in the tax reconciliation bill.

Despite the removal of those provisions, limited opportunities remain for giving incentives such as the IRA rollover provision. A second tax package (an expiring tax provisions extender bill) is under consideration which may provide a vehicle for the IRA provision—though, it’s possible that onerous charitable reforms could be attached as well.

AFP continues to push for the inclusion of charitable giving incentives and will keep members updated of Congressional actions. We urge our members to contact their House and Senate representatives and ask them to support inclusion of the IRA rollover provision in any new tax legislation.